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Understand gift card redemption percentages, why they matter, and how to improve them. Learn strategies for both consumers and retailers to maximize value.
Gift cards are a popular choice for both givers and receivers, offering flexibility and convenience. But what happens when those gift cards go unused? Understanding gift card redemption percentage is crucial for both consumers and businesses. This metric reveals not only how many gift cards are used but also provides valuable insights into consumer behavior and the effectiveness of gift card programs. In this post, we'll uncover the factors that influence gift card redemption percentage, explore industry trends, and offer actionable strategies for consumers to maximize the value of their gift cards and for businesses to encourage higher redemption rates.
Gift card redemption percentage is simply the proportion of gift cards actually used by customers. Think of it as a performance metric showing how many gift cards turn into sales. Recent data from GrabOn shows that over 56% of gift cards are redeemed within the first six months. This tells us that most people do use their gift cards, making it a key area to understand for both businesses and consumers.
Gift card redemption is the process of a customer using their gift card to buy something. It's the moment the stored value on the card transforms into a purchase. This process is pretty straightforward.
Redemption rates are a critical piece of the puzzle for retailers. They offer valuable insights into how effective gift card programs and marketing efforts are. High redemption rates mean customers are engaged and using their gift cards, which is good news for sales. However, a significant chunk of money from unused gift cards becomes what's called "breakage"—essentially profit for retailers. CBS News highlighted the financial implications of this for both businesses and consumers. Some states even require unredeemed gift card balances to be returned to consumers through unclaimed property programs, so keeping an eye on those redemption rates and working to improve them is essential. It's a balancing act between maximizing profit from breakage and ensuring compliance with regulations. For consumers, understanding redemption rates can help you make informed decisions about purchasing and using gift cards effectively. More on that later!
Understanding gift card redemption rates is crucial for both consumers and businesses. For consumers, it helps maximize the value of gifts. For businesses, it offers insights into sales trends, customer behavior, and revenue projections. Let's explore some industry benchmarks and the factors influencing these rates.
Gift card redemption rates offer a glimpse into consumer spending habits. Studies show that a significant portion of gift cards are redeemed relatively quickly. GrabOn's research reveals that over 56% of gift cards are redeemed within the first six months. This highlights a generally high rate of utilization. However, this also means a substantial percentage remains unredeemed. A 2023 analysis by NFS Hospitality showed a 57% redemption rate within six months. It's worth noting this figure hasn't fully returned to pre-pandemic levels. CBS News reported a slightly higher redemption rate, with 70% of gift cards used within the same timeframe. These varying figures underscore the dynamic nature of the gift card market.
Redemption rates aren't uniform. They fluctuate based on several factors, including card type and brand. Research indicates that redemption rates saw a temporary increase in the initial weeks following purchase in 2020 compared to previous years. The rise of e-gift cards adds another layer of complexity. Studies show that e-gift cards consistently represent 15–17% of gift card sales, but their redemption patterns may differ from physical cards. Industry also plays a significant role, with the retail and restaurant sectors often showing distinct consumer behaviors. Understanding these nuances is key to developing effective strategies for both issuing and using gift cards.
Several factors play a role in whether a gift card gets used. Understanding these influences can help both consumers and businesses make the most of them.
Gift cards from well-loved brands tend to see higher redemption rates. Think about it: you're more likely to use a gift card from a store you already frequent or a brand you admire. This ties into brand accessibility, too. A convenient location or a robust online presence makes using gift cards easier. If redeeming a gift card is a hassle, it's more likely to be forgotten. Capital One Shopping's research shows consumers are simply more inclined to use cards from retailers they already enjoy.
The card's value can influence how quickly someone uses it. Higher-value gift cards are often redeemed faster, according to GiftCardGranny's 2023 study. It's like having extra spending power, which can encourage a purchase. Expiration policies also matter. A clear expiration date can motivate people to use their gift cards. This sense of urgency can significantly drive redemptions.
Digital gift cards are increasingly popular because they're easy to store and access on your phone. This convenience often leads to higher redemption rates compared to physical cards, which can be easily misplaced. Gift Rabbit's statistics highlight this growing preference for digital formats, noting a trend toward increased usage.
Understanding how different demographics interact with gift cards offers valuable insights for both consumers and businesses. Let's explore how age, income, and gender influence gift card usage and redemption.
Millennials often hold the highest amount of unredeemed gift card value—averaging $226 per person, according to this gift card statistics report. This suggests younger generations might be more prone to accumulating unused balances, perhaps due to changing spending habits or more gift-giving occasions. This trend highlights the importance of understanding generational differences when marketing and distributing gift cards.
Higher-income individuals are also more likely to have unredeemed gift cards. Research from GrabOn indicates 62% of higher earners reported having unused gift cards. This might seem counterintuitive, but it could be attributed to a lower perceived urgency to redeem smaller amounts or simply having more disposable income.
Women tend to purchase gift cards more frequently than men, with 60% reporting regular purchases, according to this gift card trends study. This difference in purchasing behavior could stem from various factors, including gift-giving habits and shopping preferences. Understanding these gender-specific trends can help businesses tailor their gift card marketing strategies.
Let’s talk about those gift cards we all have tucked away—the ones we got for our birthday, the holidays, or maybe as a "just because" present. Sometimes, they get forgotten, lost in the shuffle of everyday life. What happens to those unused gift cards? They contribute to a phenomenon called breakage.
Breakage refers to the portion of gift card value that goes unredeemed. Essentially, it's money consumers have spent but haven't actually used, which becomes profit for retailers. While it might seem insignificant on an individual level, it adds up—billions of dollars annually. This breakage revenue has a real impact on both consumers and businesses.
The financial implications of unused gift cards are substantial. Americans currently hold around $21 billion in unredeemed gift cards. Millennials and Gen Z hold the largest share, suggesting a shift in how younger generations use them. Beyond the unspent value, many consumers experience financial loss due to gift card issues like expiration dates, lost cards, or store closures. Gift card scams also play a role, costing consumers over $228 million in 2022, according to this CBS News report. While the overall gift card redemption rate is around 57%, it's still lower than before the pandemic. This creates a complex situation where both consumers and retailers navigate the financial impact of gift card usage.
Let's explore some of the most common reasons gift cards go unused. Understanding these roadblocks can help both consumers and retailers find ways to improve redemption rates.
It's easier than you think to lose track of a gift card. They're small, often tucked away in wallets or drawers, and can easily be forgotten. Between busy schedules and cluttered spaces, gift cards sometimes simply slip our minds. A recent survey found that nearly 29% of Americans have held onto a gift card so long that it expired, and 25% have lost at least one.
Another common reason for unredeemed gift cards is a simple lack of urgency. There's no immediate need to use them, so they often get put aside for "later." This procrastination can lead to forgotten cards and missed opportunities to use them. This "breakage" – the value of unredeemed gift cards – can be significant profit for retailers. Some states require this unclaimed money to be returned to consumers through specific programs.
Sometimes, a gift card might be for a store or brand that isn't easily accessible or doesn't offer anything the recipient truly wants. This limited use can make a gift card feel more like a chore than a treat. Perhaps the store is too far away, or the merchandise doesn't align with the recipient's tastes. This can lead to the card being put aside and ultimately forgotten. Ironically, gift cards can be valuable tools for retailers to understand customer preferences and manage inventory, but only when they're actually redeemed.
Let's be honest, gift cards can sometimes feel like forgotten treasures buried at the bottom of a drawer. Out of sight, out of mind. But that's free money just waiting to be used! To make sure your gift cards don't go to waste, keep them organized. A simple note on your phone or a designated spot in your wallet can work wonders. Set reminders to check for upcoming expiration dates—nobody wants to lose out on a free latte or that new book they've been eyeing. If you're unsure when a card expires, most retailers allow you to check balances online. And if you have a gift card for a store you're unlikely to visit? Consider reselling the gift card–it's a great way to get cash or trade it for one you'll actually use.
Want customers to use those gift cards? Make it easy and enticing! Sending friendly reminders about unused gift cards can nudge customers toward a purchase. Think about offering bonus rewards for redeeming gift cards within a certain timeframe. A little extra incentive can go a long way. Promote gift card use on social media and through email marketing. Highlighting the flexibility and convenience of gift cards can remind customers of their value. And don't forget the in-store experience. Make sure your staff is well-versed in gift card policies and can process them quickly and efficiently. A smooth and positive checkout experience encourages repeat business and future gift card purchases. Explore options like integrating gift cards with loyalty programs to further incentivize redemption and build stronger customer relationships.
Technology significantly impacts how we buy, use, and redeem gift cards. From the rise of digital gift cards to helpful reminder apps, tech advancements are changing the landscape and making it easier than ever to manage and use gift cards.
Digital gift cards are rapidly gaining popularity. In 2022, the global digital gift card market reached a staggering $342.01 billion—a substantial jump from the previous year, according to Moneyzine. Many online retailers now offer digital gift card options, providing a convenient alternative to physical cards. This growth is fueled by the widespread adoption of mobile wallets like Apple Wallet and Google Pay. These digital wallets offer a secure and organized way to store and access gift cards directly from our smartphones, reducing the risk of physical cards getting lost or forgotten. This ease of access translates to higher redemption rates, benefiting both consumers and retailers. The shift toward digital also simplifies the gifting process. Sending a digital gift card takes just a few clicks, eliminating the need for physical delivery.
Plus, recipients can instantly add the gift card to their mobile wallet, ready to use at their convenience. This seamless experience contributes to the growing preference for digital gift cards, especially among younger demographics comfortable with technology.
Beyond mobile wallets, various apps and software solutions help consumers track their gift card balances and expiration dates. These tools send timely reminders, ensuring that gift cards don't go unused. As Giftbit points out, integrating digital rewards into everyday customer activities creates a more efficient and enjoyable redemption journey. Automatic tracking and timely reminders contribute to increased redemption rates. For retailers, this means more sales and fewer unredeemed funds. Furthermore, technology allows businesses to gather valuable data on gift card usage.
Tracking when and how gift cards are redeemed provides insights into customer behavior and spending patterns. This data-driven approach enables retailers to tailor their marketing efforts and optimize their gift card strategies, ultimately improving overall redemption percentages. By understanding how customers use gift cards, businesses can create more targeted promotions and enhance the customer experience.
The future of gift card redemption is digital, and it's evolving quickly. Think integrated rewards programs where you earn points or a digital gift card for everyday purchases, making redemption seamless and more appealing. This shift toward digital rewards creates a more engaging customer experience, encouraging faster redemption. The sheer growth of the digital gift card market, valued at over $342 billion in 2022, speaks volumes about this trend. We can expect to see more innovative ways businesses incorporate digital rewards into their customer interactions.
Consumer behavior plays a significant role in shaping the future of gift cards. While many appreciate the flexibility of gift cards, a surprising number of people let them go unused. Studies show nearly 29% of Americans have unintentionally let a gift card expire, and a quarter have lost at least one. Millennials seem to hold the most unredeemed value, averaging $226 per person. However, the vast majority of consumers (90%) plan to spend beyond the value of their gift cards, indicating a continued interest in using them as a payment method. This suggests that retailers who focus on convenience and user experience can tap into this spending potential and drive higher redemption rates.
Let's be honest, gift cards are great. But sometimes they end up forgotten at the bottom of a drawer or lost in the digital abyss. Here's how to make the most of every gift card:
Think of gift cards like that perfectly ripe avocado—best enjoyed fresh. Most people redeem their gift cards within six months, so join the club and put that card to use sooner rather than later. You're more likely to remember where it is and what you wanted if you use it while it's still top of mind.
While federal law generally protects your gift card balance from expiring for five years, some states have longer grace periods. New York, for example, gives you nine years. Check the fine print on the back of the card or the retailer's website for specifics. Knowing the expiration date helps you prioritize which cards to use first.
Not interested in the coffee shop gift card your aunt gave you? No problem. Resale sites offer a way to trade unwanted gift cards for cash. While you might not get full value, receiving 70% to 80% is often better than letting the card gather dust. It's a quick way to turn an unwanted gift into something useful.
What exactly is gift card breakage?
Gift card breakage is the industry term for the portion of gift card value that goes unredeemed. It represents the money consumers spend on gift cards that ultimately isn't used to purchase goods or services, effectively becoming profit for the retailer.
My gift card expired. Is my money gone?
Not necessarily. Federal regulations generally protect your gift card balance from expiring for at least five years from the date of purchase. Some states have even more consumer-friendly laws extending this period. Check your state's regulations and the retailer's policy for specifics.
Are digital gift cards better than physical ones?
Both have their pros and cons. Digital gift cards offer the convenience of easy storage and accessibility through mobile wallets, reducing the risk of loss. Physical gift cards, however, can be a more tangible and personal gift, especially for special occasions. Ultimately, the "better" choice depends on individual preferences and how you plan to use the gift card.
Why should I care about gift card redemption rates?
Understanding redemption rates helps you, as a consumer, make informed decisions about purchasing and using gift cards effectively. Knowing how and when gift cards are typically redeemed can help you maximize their value and avoid common pitfalls like forgetting about them or letting them expire. For businesses, these rates offer valuable insights into customer behavior and the effectiveness of their gift card programs.
What can retailers do to encourage customers to use their gift cards?
Retailers can implement several strategies to boost gift card redemption. Sending reminders about unused balances, offering bonus rewards for timely redemption, and promoting gift card use through marketing campaigns can all encourage customers to put their gift cards to use. A smooth and efficient in-store redemption process also contributes positively to the customer experience and encourages future gift card purchases.
Former Root, EVP of Finance/Data at multiple FinTech startups
Jason Kyle Berwanger: An accomplished two-time entrepreneur, polyglot in finance, data & tech with 15 years of expertise. Builder, practitioner, leader—pioneering multiple ERP implementations and data solutions. Catalyst behind a 6% gross margin improvement with a sub-90-day IPO at Root insurance, powered by his vision & platform. Having held virtually every role from accountant to finance systems to finance exec, he brings a rare and noteworthy perspective in rethinking the finance tooling landscape.
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